The People’s Bank of China appointed JPMorgan Chase Bank N.A. as a yuan clearing bank in the U.S., the first non-Chinese lender for such a role globally and a further step to promote international use of the currency.
The arrangement is made under the auspices U.S.-China strategic economic dialogue and in conjunction with the U.S. Federal Reserve, according to a statement posted on the People’s Bank of China website. Bank of China Ltd.’s New York branch already conducts such business in the U.S. and other Chinese lenders clear yuan payments in a number of countries.
Despite China’s aim to internationalize the yuan, its popularity has faltered amid continuing capital controls to keep money from flowing out of the country. Global transactions using the currency fell to 1.54 percent in December, down from a record 2.79 percent in August 2015, Swift data show.
"It’s a major step both for the yuan’s internationalization and for China’s further opening of its financial sector," said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered Plc in Hong Kong. "It’s setting up the expectation that in other offshore yuan centers, in London, in Singapore, we could see a non-Chinese bank become the yuan clearing bank."
JPMorgan, the biggest U.S. bank, last year became the first U.S. lender to win approval to underwrite corporate bond sales in China’s interbank market. The U.S. bank’s businesses in China include corporate banking and stakes in a fund manager and in a commodities futures joint venture, according to the bank’s China website. In 2016, it reached an agreement with First Capital Securities Co. to sell its 33.3 percent stake in their securities joint venture.
Re-disseminated by The Asian Banker from Bloomberg